BP’s decision to write down up to $5 billion from its gas and low carbon energy division places a hard number on what has been an increasingly visible problem for the company: its early and aggressive push into renewables has failed to deliver competitive returns relative to its peers.
At a time when global oil demand remains resilient and upstream margins have normalized above pre-pandemic averages, BP has emerged as the least profitable of the supermajors, underscoring the financial cost of its transition-first strategy.
The impairment reflects weaker long-term price assumptions, rising capital costs, and slower-than-expected commercialization across parts of BP’s low carbon portfolio, including renewable power, bioenergy, and hydrogen-linked assets. While BP does not disclose a detailed asset-by-asset breakdown, the scale of the write-down suggests structural rather than cyclical issues, particularly as peers such as ExxonMobil and Chevron have largely avoided similar impairments by maintaining capital discipline and prioritizing hydrocarbons.
BP’s pivot toward renewables accelerated under former CEO Bernard Looney, with the company committing to reduce oil and gas production by 40 percent by 2030 while expanding renewables capacity to 50 gigawatts. That strategy relied on assumptions that policy support, carbon pricing, and power market returns would converge quickly enough to offset declining upstream cash flows. Instead, higher interest rates, supply chain inflation, and oversupplied power markets in Europe compressed returns on renewable projects, while oil and gas prices rebounded more strongly than expected.
The financial gap is evident in comparative metrics. Over the past two years, BP’s return on capital employed has consistently trailed that of ExxonMobil, Chevron, and Shell, even as those companies also maintained selective exposure to low carbon technologies. Investors have responded accordingly, with BP’s valuation multiple lagging peers and shareholder pressure mounting to reset strategy.
The company’s early-stage turnaround now points clearly back to hydrocarbons. BP has scaled back capital allocated to transition-focused businesses, exited or paused several renewable ventures, and abandoned its commitment to sharply cut oil and gas production. Management has signaled a renewed emphasis on upstream investment, particularly in assets with short payback periods and lower breakeven costs, aiming to stabilize cash flow and improve capital efficiency.
This shift does not amount to a full rejection of the energy transition, but it does suggest a repricing of ambition. BP is repositioning low carbon energy as an option-set rather than a growth engine, focusing on projects that can meet stricter return thresholds and limiting exposure to merchant power risk. The write-down crystallizes the reality that, under current market conditions, low carbon investments have not yet matched the risk-adjusted returns of conventional oil and gas at scale.
